Recently, startup accelerator, Y Combinator, announced it has updated its terms, providing participating firms and companies with more total cash as they are set to invest $500,000 in batch startups.
The investment comes in two different forms — the popular Y Combinator equity deal, for 7% of accelerated startups worth $125,000.
The group is also set to offer $375,000 in the form of an uncapped SAFE (Simple Agreement for Future Equity) note — with a “most favored nation” clause.
Uncapped translates to having no defined maximum price at which the $375,000 SAFE will convert to shares, while the “most favored nation” language means that Y Combinator gets as good a deal as anyone else in a later conversion.
That Y Combinator offering more capital to startups is no surprise; indeed, the bigger surprise is that it took this long for the group to reevaluate and update its terms.
Nevertheless, half a million dollars is very much available in keeping up in investing markets where pre-seed and seed-stage have been at the forefront in these past years.
This newly updated condition however doesn’t mean that accelerators will have any less preserved benefits in portfolio companies.
In fact, it is arguable that the updated terms are defensive, offering more capital in addition to its traditional equity stake in companies that pass through its doors.
So even the accelerator’s initial equity investment is put to work at a historically lucrative price point, this new development will help it attract the best early-stage startups with larger checks.
As the startup market has evolved, Y Combinator has constantly updated itself. Paying close attention to in-person work, during the pandemic, YC went remote.
TechCrunch reckoned that the result of that switch was more participating startups from other markets and countries.
The group has also moved to remote demo days, and that has been a welcome shift here at TechCrunch. We no longer have to go all the way down from San Francisco to a large room with few chairs.
It will be interesting to see the response of rival accelerators to Y Combinator’s updated terms.
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